In order to illustrate how enterprise value works, we will use the example of Apple.
Apple inc., as of April 2022, has market capitalisation of $2,600,000,000,000, with total debt of $125,570,000,000 and cash of $62,640,000,000.
So, the enterprise value would be: $2,600,000,000,000 + $125,570,000,000 – $62,640,000,000 =$2,662,930,000,000
Then, we need to divide this number by the total number of shares that Apple has outstanding, which is 16,320,000,000.
Therefore, the enterprise value per share is $2,662,930,000,000/16,320,000,000 =$163.17.
If the current stock price is significantly higher than this amount, then the investor may decide that it is not a worthwhile investment. However, if the stock price is lower than this figure, then they may decide to go ahead and invest.